Question 4. [15 points) The S&P index is currently at 4,200. You manage a $14 million indexed equity portfolio The S&P 500 futures contract has a multiplier of $250. a. Suppose you are temporarily bearish on the stock market, but you would like to avoid selling your equities. How could you use S&P futures to manage your exposure? (Please be specific about the number of contracts and the nature of the position you would take). > b. What is the arbitrage-free futures price if T-bills pay 1.5% per six months and the semiannual dividend yield is 0.5%? c. Compute the total risk-free proceeds on the hedged strategy in part (a). How does the retum on this overall hedged strategy compare with the return on the T-bill rate? 7 Question 4. [15 points) The S&P index is currently at 4,200. You manage a $14 million indexed equity portfolio The S&P 500 futures contract has a multiplier of $250. a. Suppose you are temporarily bearish on the stock market, but you would like to avoid selling your equities. How could you use S&P futures to manage your exposure? (Please be specific about the number of contracts and the nature of the position you would take). > b. What is the arbitrage-free futures price if T-bills pay 1.5% per six months and the semiannual dividend yield is 0.5%? c. Compute the total risk-free proceeds on the hedged strategy in part (a). How does the retum on this overall hedged strategy compare with the return on the T-bill rate? 7